Here’s what’s behind the latest ‘bubble collapse’ chatter

“That’s all I can stands, I can’t stands no more” — Popeye, as quoted by Harry Dent.

After we saw a five-week winning streak come to an end on Thursday before the long Easter weekend, there’s hardly a festive mood in markets as March winds down. And nobody does “hardly festive” quite like Dent, who was happy, again, to peddle some gloom.

“The economy will likely worsen into the conventions in July and the elections in November,” he wrote in his latest rant, adding that the “bubble collapse” and “global slowdown” could soon have him scurrying off to the safety of a remote Caribbean island (see “the call” below).

But before all that, a busy finish to the month should keep things interesting. Janet Yellen and the monthly jobs number will likely play as much a part as anything in coloring trade in the coming days. There’s also no shortage of other data investors will be eyeing.

Also hanging over markets, besides the unsettling antics of our politicians, the dark clouds of the upcoming earnings season are hanging over markets, and that’s just a few weeks away. Corporate earnings growth has been in the tank, and there’s not much to get excited about once the next batch of companies report.

If bulls want to drive themselves crazy, there’s plenty of fodder. Included in that, according to our chart of the day, is what we’re seeing in global trade activity. By one particular metric, it hasn’t been this weak in a decade (more on that below).

The stat

131,617 contracts — That’s how much the number of short positions on West Texas Intermediate crude have fallen since Feb. 2, according to Bloomberg. There hasn’t been that much liquidation in a decade. By comparison, bullish bets fell by 971 over that time period as prices rallied.

The chart

“This wasn’t part of the rosy scenario,” said Wolf Richter of the Wolf Street blog, in presenting this chart of global trade. In terms of price per unit in dollars, trade fell 3.8% in January from December, capping a 23% plunge from June 2014, which incidentally marked a pivot lower for several indexes, including the price of oil, revenues at S&P 500 companies, etc., he said. The index is now lower than it had been at the trough of the Financial Crisis.

Wolf Street

“The unit price measure in U.S. dollars is a reflection of two forces, occurring simultaneously: the collapsed prices of the commodities complex, ranging from oil to corn; and the strength of the U.S. dollar, or rather the weakness of certain other currencies, particularly the euro,” Richter explained.

“It forms another indictment of central bank policies that have failed to stimulate demand though they have succeeded wonderfully in stimulating asset prices, malinvestment, and overcapacity,” he said.

The call

Noted newsletter writer Harry Dent has his fans. He also has plenty of detractors. He’s nailed some big calls over the years. And he’s missed at least his share of them, too. His latest outlook fits in right there with some of his gloomier predictions: Civil unrest is about to slam the United States. Believe what he says or not, he makes some good points. Check out the whole dreary blog post.

Dent said he sees a combination of factors leading to chaos, both economically and socially, in 2017. “The U.S. has the most polarized politics of any major country, and the greatest income and wealth inequality in the developed world,” he wrote. “The politics are more polarized than even the Depression and more like the Civil War — and we have over 300 million guns in this country.”

The quote

Getty Images

“The would-be first ladies... have been flattened into human baseball cards, to be rated and traded, compared and assessed, and their worth depends not on who they are or what they do, but on how good they look and how much their husbands love them.” — Jennifer Weiner, writing in the New York Times about the last kerfuffle between Donald Trump and Ted Cruz.

The economy

The big report in this hectic week is the jobs number due Friday, but there’s plenty to keep traders occupied until then. As for Monday, data showed consumers spent a little more and saved a little more. Later, we’ll get pending home sales, then at 10:30 a.m., the Dallas Fed manufacturing survey hits is released. Also, we’ll hear from Janet Yellen on Tuesday.

Earnings

Not much in the way of earnings to get excited about this week, though we get Lululemon
LULU, +0.67%
and Micron
MU, -0.77%
later in the week. The onslaught of the new season begins later in April, and early indications are pointing to the weakest stretch of reports in the past year. A bad showing would mean the first four quarters of consecutive declines since 2009, according to data crunched by FactSet.

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